American Federalism: How Well Does It Support Liberty?

The American federal system was founded on the principle that competition among governments is the appropriate institutional complement to the individual liberty on which the nation was founded. Over the past century or so, however, the federal system has become increasingly monopolistic or collusive. A system of competitive federalism stands in opposition to a system of monopolistic federalism, in which political entities act in cartel-like fashion to promote the interests of their supporters over the interests of the rest of society. Within a system of monopolistic federalism, government becomes an instrument for expanding or contracting individual rights; this imports feudal principles into a constitutional system founded on the rejection of those principles.

Federalism is generally described as a pro-liberty form of government. Yet it is surely reasonable to wonder how two sources of political power within the same territory can be more favorable to liberty than one. It turns out that the pro-liberty quality of federalism is a possible but not a necessary feature. This essay explores this two-edged quality of federalism to discern more clearly the relationship between federalism and liberty. It also examines how the erosion of federal liberty that has been underway for around a century might be amended in a pro-liberty direction.

About the Author

Richard E. Wagner is the Holbert L. Harris Professor of Economics at George Mason University. He received his PhD in economics from the University of Virginia in 1966. He joined the faculty of George Mason University in 1988, after having held positions at the University of California at Irvine, Tulane University, Virginia Polytechnic Institute and State University, Auburn University, and Florida State University.

He is the author of more than 200 articles in professional journals and some 30 books and monographs, including Inheritance and the State, Democracy in Deficit, The Fiscal Organization of American Federalism, To Promote the General Welfare, Public Finance in a Democratic Society, and Public Choice and Constitutional Economics. He serves in an advisory relationship to such organizations as the Independent Institute, the Institute for Research on the Economics of Taxation, the James Madison Institute for Public Policy Studies, the Public Interest Institute, and the Virginia Institute for Public Policy.